Campbell Soup posted mildly disappointing earnings Wednesday. Investors greeted it like cold soup.
The company said organic sales—which strip out acquisitions, divestitures and foreign-exchange effects—grew 5% in the quarter ended Jan. 31 from a year earlier. That was a deceleration from 8% growth in the prior quarter and shy of analyst estimates for growth of around 7%.
Campbell partly blamed increased Covid-19 cases , which it said hurt production by keeping workers out of plants, dragging on growth by around 1 percentage point. Campbell shares fell nearly 3% in morning trading.
Like other food companies in recent weeks, Campbell made its case Wednesday for why elevated sales should prove sticky after the pandemic ends. New customers are coming back in large numbers for repeat purchases, including millennials , especially in the once-reviled condensed soup category, Chief Executive Mark Clouse said on a conference call.
Mr. Clouse also attempted to draw analyst attention to the company's snack business, which accounts for around half of sales and includes brands such as Goldfish crackers and Kettle chips. This business was growing even before the pandemic and has room for margin improvement, he said.
Analysts were hungry for hard facts. One asked how sales have performed in U.S. markets that have just reopened; Mr. Clouse said it is too early to say. Another dismissed survey data cited by the company showing how happy consumers are with Campbell's brands, saying that even consumers themselves don't know how their behavior will change post-pandemic.
Food stocks generally haven't fared well lately, both on this skepticism of their outlooks and on rising interest rates , which decrease the attractiveness of their dividends. Campbell was down 2.9% so far this year before Wednesday's results; Kellogg and General Mills shares were 5.2% and 2.4% lower, respectively.
Campbell looks attractively valued at 15.5 times forward earnings, compared with a five-year average of 16.8 times, according to FactSet. If sales do stay elevated in the second half of this year, it could prove a powerful catalyst for the stock. For now, though, Campbell and the broader food sector remain a post-pandemic show-me story.